EFFECT OF CORPORATE SOCIAL RESPONSIBILITY COSTS ON THE FINANCIAL PERFORMANCE OF SUGAR MANUFACTURING COMPANIES IN KENYA

Abstract

<p>The impact of CSR costs on financial performance is becoming increasingly important to a wide variety of corporate stakeholders. It is considered to be one of the instruments that businesses need to use to establish and maintain a calm working atmosphere. Engaging in corporate social responsibility and their disclosures are common in the recent business setting around the globe. Corporate social responsibility has become more significant over the past decades, and the validity of research on how it is associated with firm performance remains uncertain and incomplete. Many public and private Sugar manufacturing firms in Kenya have been facing poor financial performance, and some are closing up, even after receiving funding from the government. Consequently, this study aimed to establish the effects of corporate social responsibility cost on the financial performance of sugar manufacturing companies in Kenya. The specific objectives of this study were; to assess the effect of community development costs on the financial performance of sugar manufacturing companies in Kenya, to examine the effect of environmental responsibility costs on the financial performance of public and private sugar manufacturing companies in Kenya, and to evaluate the effect of economic responsibility costs on the financial performance of sugar manufacturing companies in Kenya. The study was guided by the stakeholder theory, legitimacy theory and theory of the firm. The study adopted a correlation research design. The study's target population was 12 sugar manufacturing companies in Kenya. A census sampling technique was used to select all 12 sugar manufacturing companies in Kenya. A secondary data collection sheet was used to document information from audited financial statements of the companies downloaded from the website from 2012 to 2021. Panel Data was analyzed using descriptive and inferential statistics. Panel regression analysis indicated that community development costs, economic responsibility costs and environmental responsibility costs had a significant effect on financial performance with a coefficient of 0.2146, 0.2896, 0.2728 and p-value of 0.006, 0.000, and 0.000. The study depicted that corporate social responsibility costs had a significant effect on financial performance with an R2 of 0.29 which implied that corporate social responsibility costs explain 29% of the financial performance of sugar companies in Kenya. Therefore, the study concluded that corporate social responsibility costs improve financial performance. The study recommended that the management of sugar companies should provide more funds to community development costs, policymakers should develop strategic policies that would enhance the practice of economic social responsibility, and respond to environmental demands for a cleaner environment.<br /> <br /><strong>JEL:</strong> Q10; L60; L66</p>